FMCG sector set to grow 13% in FY11: Report

Mumbai: The Indian fast-moving consumer goods (FMCG) sector is expected to grow 13% during 2010/11 on the back of strong economic growth, a good monsoon and subsequent rise in rural income, an industry body said.

The sector grew 11.4% in the quarter ended June, but eased a bit to 11% during the September quarter due to high inflation and higher raw material prices, the Confederation of Indian Industry (CII) said in a report.

The report also highlighted the emergence of strong regional players across categories such as food, laundry and soaps, further highlighting the risks of increased competition eating into the market share of established players.

Faced with rising costs and competition, Indian FMCG companies are increasingly betting on expanding their geographical footprint with overseas acquisitions, expecting higher returns from international operations to offset lower growth in India, the report said.

The sector, however, is faced with challenges such as rising sale of fake or counterfeit products leading to an annual loss of around Rs2,700 crore, which poses a serious threat to profitability, besides rising prices and multiple taxation.

The report further recommends an early implementation of the Goods and Service Tax, which would create a uniform and single-point taxation system, and help reduce prices of FMCG products.